A time capsule of the greatest financial mania in the history of mankind, told in real-time by regular folks and patriots. May future generations better understand the madness of crowds, and how power and money corrupt.

July 16, 2006

Every once in awhile I'll be reminded of this piece published May 2006, or the amazing piece in June 2005 in The Economist that changed my life "In Come the Waves". Both tell us how we got to where we're at, and how it's gonna be.Enjoy

The price runups of the past several years are reason enough for concern. A report from Cleveland-based National City, a top banking and mortgage concern, points to serious overvaluation in a number of second-home hot spots in Florida, California and elsewhere.

Tucson, Prescott and Phoenix in Arizona are estimated to be as much as 52% overvalued based on income levels, population densities and historical prices. Also high on the list: Bend, Ore., and New Jersey's Ocean City and Atlantic City, where homes are deemed overvalued by 50% and 60%, respectively. (See table.)

Behind all this is a fervor eerily reminiscent of the late 1990s on Wall Street. Some 65% of second-home owners surveyed by the National Association of Realtors said they considered their second homes better investments than stocks, and 29% said they planned to buy additional properties within two years. An eye-popping 64% of investors with four or more properties planned to buy another property within two years.

13 comments:

Bank Sports
said...

Bend, Oregon is more overvalued than Florida now, because since the time when the Barron's article came out, Florida's bubble has popped. Bend's hasn't yet, but inventory is building and oblivious local builders just keep building into an oversupplied market but no one yet has had the cojones to lower prices like in the bigger markets - it's a small town and the builders are kind of a cartel.

Look for Bend to be the late-breaking bubble story - one where there's no "orderly downturn," but a nice, big, sudden September-October crash. Some locals think Bend might have the highest inventory-per-capita rate in the country right now.

Being a Philly boy I have a soft spot for OCNJ, but not enough to buy, even if I had the means to. My sister bought the lower level of a duplex for probably the better part of half a million last year, which as far as I can tell gets you into the lower rungs of the market. I didn't want to say anything at the time - sour grapes and all that. In the old days ('70's) you could swing on down in an hour and a half more or less. Nowadays, it needs about the same level of planning as a military operation, that is if you want to avoid a four hour crawl.

bends a strange one, LOTS on outside money coming into town. Outsiders who are wealth(old money) or people who cashed out down south and moved up to Oregon. Got a friend in Redmond who has bought several properties in the last few years, one being commercial. One thing that caught me off guard last time we spoke was he couldn't wait to finish that project, because there was alot of his money hanging out there. First time he has ever wobbled on the strengh of Bend area real estate. I think its over rated, give me the old Oregon (coastal or willimette valley) with all its great rain and nice summmers.

The Economist scored another subscription with their great article about the housing bubble. I believe this issues was 6/27/05; I bought it when I was traveling, and ordered the Economist the next day.

Getting it weekly is a little much; it's like a 'book of the week' club. Don't have time to read it.